Proposed 2012 Methodology for Determining Ancillary Service Requirements

1. Proposed 2012 Methodology for Determining Ancillary Service Requirements

2. Regulation Service – Review of Current Methodology • Inputs for determining the monthly Regulation Service requirements include the following: • Last 30 days of Regulation Service deployments • 5 minute net-load changes from the last 30 days and from the same month of the previous year • Regulation Service requirement for the same month of the previous year divided by 2 • The division by 2 is intended to account for the fact that Regulation moved from a 10-minute product in Zonal to a 5-minute product in Nodal

3. Regulation Service – Proposed Methodology Changes • A number of changes made during the last iteration of the document were done in preparation for the market transition • Historical data from the Zonal Market would not necessarily be relevant or appropriate for the Nodal Market • The proposed changes are as follows: • The Regulation Service deployments from the same month of the previous year will be considered along with the deployments from the last 30 days • The Regulation Service requirement for the same month of the previous year divided by 2 will no longer be used as an input

4. Non-Spin Reserve Service – Review of Current Methodology • For determining the monthly requirement: • Break up the hours of the day into groups • Calculate the 95th percentile of the day ahead net-load forecast error • Set the requirement such that the combination of Non-Spin and Regulation Up Service will cover 95% of the net-load forecast error • If it has been determined that the forecasts have shown a tendency to be conservative, that bias will be removed from the load forecast and added to the NSRS requirement • This attempts to remove bias from forecasts while ensuring that reliability in maintained • Both a floor and ceiling are placed on the requirement • Floor during on-peak hours of single largest unit • Ceiling of 2000 MW during all hours

5. Non-Spin Reserve Service – Proposed Methodology Changes • Under the Nodal Market, Market Participants are more easily able to self commit Resources closer to Real-Time • Because of this it may not be necessary to procure Non-Spin to protect against 1600 day ahead forecast error • Proposal is to use net-load forecast error from midnight instead of the 1600 day ahead error • This should better align the ancillary service requirements with Nodal timelines • The Regulation Up requirement will continue to be subtracted from the forecast error to determine the Non-Spin requirement

6. Effects of Proposed Methodology on NSRS Requirement • The overall effect is that slightly less NSRS would be procured on average • This varied by month • The average effect on the value subtracted from the MTLF was insignificant

7. Proposed Non-Spin Methodology Examples – March ‘11 Proposed Methodology Current Methodology

8. Proposed Non-Spin Methodology Examples – May ‘11 Proposed Methodology Current Methodology

9. Proposed Non-Spin Methodology Examples – July ‘11 Proposed Methodology Current Methodology